A new study from the Cass Business School and LeBow College of Business at Drexel University found shareholders lose out because of “self-serving” CEOs ditch premium for their own gain.

The researchers stuidied more than 850 US-based acquisitions announced between 1999 and 2007, finding that executives with golden parachutes were more likely to sell their companies at a discount during a takeover.  

Golden parachute benefits could include stock options, bonuses, and an attractive severance pay. The study, which compared the severance payoff and the merger pay package, found that deals involving attractive parachutes resulted in a 5% discount in the price acquirers paid. According to the study, the corporations on average ended up selling the company $249 million below value. 

Dr. Anh Tran from Cass Business School noted in the study that when a company is marked as a takeover candidate, CEOs become vulnerable. “They have direct influence over actions that could provide personal benefit at the possible expense of shareholders.”

In the UK golden parachutes have come under scrutiny recently after business secretary, Vince Cable, condemned directors who put their personal gain before shareholder interests.  Cable assured to review the way pay incentives for top executives are drawn up. 

The Obama administration has also put limits on parachute payments to rein in executive compensation at companies that were bailed out by the government.